Ad revenues are expected to continue to decline through 2027; sector suffers from lack of supplies, lockdowns in China and war
Digital ad market analysts estimate that advertising revenue is expected to rise 10% this year. Growth will be lower than that recorded before the covid-19 pandemic.
Read the year-by-year evolution chart from 2010 to projections for 2027:
The industry slowdown is caused by supply chain problems and inflation, consequences of lockdowns in China and the Russia-Ukraine war.
Stocks in the sector are feeling the impacts of timid growth. according to axiosthe shares of Snap (the company that owns Snapchat), for example, have fallen by more than 26% since Thursday (21.Jul.2022), when the company reported that its revenue would decrease significantly in the coming months.
Added to the uncertainty over the sale to billionaire Elon Musk, the drop in advertising also affected Twitter’s results. The social network’s revenue totaled $1.18 billion, down 1% year-on-year and below expectations of $1.32 billion. The loss in Q2 2022 was $270 million.
Pinterest, Meta (owner of Facebook, Instagram and WhatsApp) and Alphabet (of Google) were also hit. Earnings reports from media companies are expected to be released in the coming days.
PROJECTIONS
Some retreat in ads was already expected. Projections were cut in March following the invasion of Ukraine and as the global economy began to weaken.
At first, advertising agency Magna predicted a 12% growth in 2022 compared to last year in the global advertising market. The forecast was reduced to 11% in March and to 9% in July, but remains optimistic.
For comparison, another company in the industry, Zenith, recently dropped its 2022 growth projections from 9.1% to 8%. GroupM, on the other hand, expects advertising to grow 10% this year.
The effects are most visible in China, which still faces Covid lockdowns. Ads in the country are expected to grow 8% this year, according to Magna.
Europe, which is most affected by the war in Ukraine, will feel it even more. Countries like Germany and Italy are projected to grow at around 6% and 3%, respectively.
In 2021, the ad market faced an accelerated recovery compared to 2020. This cheered up the industry, which made big bets and is now needing to take some steps back.
In response, media and technology companies are holding back spending and hiring.
Magna predicts that the global ad market growth in 2023 will be just 6%.
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